National Gas (Victoria) (Declared System Provisions) Regulations 2024

Declared system provisions. The Regulations operate only on NGR provisions that are "declared system provisions". This concept is defined in the National Gas (Victoria) Law. In essence, the Victorian declared gas system is the network of transmission pipelines and associated facilities designated under Part 3 of the National Gas (Victoria) Law. The NGR applies to that system, but not all NGR rules are automatically enforceable through civil penalties in Victoria. The Regulations select a subset for enforcement.

Class A, B, C civil penalty provisions. The Regulations create three penalty tiers. The text does not explain the rationale for the tiers. The nominal penalty amounts are set in the National Gas (Victoria) Law at section 3A(1)(a), (b), and (c). The Regulations merely say that for Class A the penalty is under section 3A(1)(a)(i) or (ii), for Class B under (1)(b)(i) or (ii), and for Class C under (1)(c)(i) or (ii). The indexation clause (clause 47A, Schedule 2 of the Law) means these amounts increase annually with inflation. The practical effect: a breach in 2024 carries a different dollar figure from a breach in 2025, and the penalty exposure grows over time. The Regulations do not specify the exact indexation method as that is in the Law.

Conduct provisions. A conduct provision is a NGR rule listed in Schedule 2. Breach of a conduct provision can lead to the AER issuing a direction, seeking an injunction, or taking other enforcement action under the National Gas (Victoria) Law. Conduct provisions are not automatically civil penalty provisions (though some are listed in both schedules, such as rule 260(5)). The distinction matters because civil penalty proceedings require the AER to prove the breach on the balance of probabilities and seek a court ordered penalty. Conduct provision enforcement can be more flexible and administrative in nature.

Indexation. The civil penalty amounts are indexed in accordance with clause 47A of Schedule 2 to the National Gas (Victoria) Law. While the Regulations do not set the base penalty amounts, they confirm that the indexed amount applies. This imposes a compliance burden in that entities must track the current indexed figure, not the figure at the time the Regulations were made. The indexation operates automatically and is not within the control of the regulated entity.

Revocation of 2014 regulations. The key change from the 2014 version is the expansion of the list of civil penalty provisions. The 2014 regulations had a single table of civil penalty provisions. The 2024 version introduces three classes and adds rules 289E(1), (3), (4), (7), 290A(3), 293(5)-(7), 317B(3), (7) and 260(5) as civil penalty provisions. The 2024 Amendment Regulations, effective 17 December 2024, added Classes B and C and increased the conduct provisions list by several new rules (286B(5), 289A, 289E, 289F, 293, 303, 317A, 317B). This expansion reflects a policy decision to bring more NGR obligations under the direct enforcement regime, increasing the regulatory burden on market participants.

The Regulations affect any person or entity that is subject to the National Gas Rules in respect of the Victorian declared gas transmission system. This includes:

• Pipeline operators. The primary class of regulated entity. Operators of declared transmission pipelines in Victoria must comply with a wide range of NGR obligations relating to access arrangements, capacity trading, pipeline operation, maintenance and information provision. Many of the listed rules in Schedule 2 pertain to the obligations of a "service provider" under the NGR (e.g., rules 211, 213, 216, 219, 225, 229, 233, 242, 243, 246, 250, 254, 259, 260, 263, 268, 270, 272, 273, 275, 279, 280, 281, 286B, 289, 289A, 289E, 289F, 290, 291, 292, 293, 294, 295, 296, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 312, 317A, 317B, 324, 326, 327, 328, 329, 333, 334, 335, 337, 338, 339, 341). These rules cover everything from the contents of an access arrangement to operational obligations for capacity management, and from compliance with the short term trading market (STTM) to information disclosure. A breach now carries the risk of a civil penalty or enforcement direction.

• Market participants in the STTM. The declared gas system in Victoria includes the STTM. Rules 289E (STTM conduct) and 289F (gas injection and withdrawal) appear in both the civil penalty tables and the conduct provisions list. Any entity that trades gas on the STTM, injects gas into the system or withdraws gas from it, must comply. The Regulations make it clear that non-compliance with STTM obligations can result in a civil penalty.

• Users of the declared system. Entities that use pipeline services (shippers, producers, retailers) are indirectly affected. While the direct obligations fall on the pipeline operator, users can also be subject to certain NGR rules (e.g., rule 260(5) on provision of information). The conduct provisions list includes rules that impose obligations on users, such as rules 307 (use of capacity), 308 (transfer of capacity) and 309 (surrender of capacity). A user that breaches these rules can now be subject to AER enforcement action.

• The Australian Energy Regulator (AER). The AER gains additional enforcement tools. It can now seek civil penalties for breaches of the listed NGR rules and can issue directions for breaches of conduct provisions. This expands the AER's enforcement toolkit and increases its leverage.

• The Victorian Government and regulatory bodies. The Regulations do not directly affect the Victorian Government, but the policy behind them reflects a desire to align Victorian enforcement with the national regime. The indexation of penalties means the revenue from penalties will increase with inflation, which may be a consideration.

• Compliance officers and legal counsel. The proliferation of listed provisions (over 80 in Schedule 2) means that compliance monitoring must cover a long list of NGR rules. The addition of civil penalty exposure for certain rules (especially the new STTM rules) will require focused attention.

The Regulations do not create duties or rights. They designate existing duties in the NGR as enforceable through particular mechanisms. However, the designation has practical implications for both duties and rights.

Duties. The duties that become civil penalty provisions are: under rule 326A(2) (a Class A duty - presumably relating to capacity reservation or trading), under rule 289E(7) (Class B - an STTM duty), and under the ten Class C rules. The Class C rules include duties such as: rule 260(5) (provision of information to the AER), rule 289E(1) (STTM good faith or trading conduct), rule 289E(3) (STTM nomination obligations), rule 289E(4) (STTM scheduling), rule 290A(3) (STTM gas day obligations), rules 293(5)-(7) (STTM balancing and reporting), rules 317B(3) and (7) (capacity trading). For each of these, the duty is already in the NGR. The Regulations add the consequence that breach can result in a civil penalty. This increases the expected cost of non-compliance, which may change behaviour.

Rights. The Regulations do not confer private rights of action. The enforcement regime is regulator driven. However, the existence of the civil penalty provisions may indirectly strengthen the bargaining position of users who suffer loss from a breach, because the AER may investigate and seek penalties, which could form the basis for a private damages claim under the National Gas Law (though the source does not confirm this). Similarly, the conduct provisions list gives the AER a basis to issue directions that can be enforced. Users may benefit from quicker regulatory intervention.

Rights to be free from breach. The Regulations do not create any right for a regulated entity to be free from the obligations. The obligations are already in the NGR. The classification may actually reduce flexibility, because the AER may be less willing to exercise discretion when a rule is listed as a civil penalty provision.

Procedural rights. The Regulations do not modify the enforcement process. The AER must still follow the procedure in the National Gas (Victoria) Law, including giving notice, providing an opportunity to respond, and proving the breach. The Regulations do not affect that.

Right to seek review. Decisions to impose civil penalties are made by a court, not by the AER. The AER must apply to the court. However, the AER can issue infringement notices for conduct provisions, which give a right of review. The Regulations do not address this.

The Regulations do not set out the penalty amounts; they refer to the National Gas (Victoria) Law for the quantum. However, the Law (section 3A) sets maximum penalties per breach. The indexation provision means these amounts increase over time. The Regulations are silent on whether the penalty is per day for continuing breaches. The underlying Law likely provides for ongoing penalties. The practical consequence: a breach that continues for weeks or months escalates the penalty exposure significantly.

Class A. Only rule 326A(2) is classified as a Class A civil penalty provision. The penalty amount is the higher of the two amounts in section 3A(1)(a)(i) or (ii). The source does not reveal what those amounts are, but they are likely the highest tier for the most serious breaches (possibly in the order of hundreds of thousands or millions of dollars for corporations). Rule 326A(2) is presumably a key provision concerning capacity reservation or trading in the capacity trading market (Part 19 of the NGR). Breach can attract a substantial fine.

Class B. Rule 289E(7) is the only Class B provision. The penalty is set by section 3A(1)(b). This is presumably a mid tier. Rule 289E concerns STTM conduct. Subrule 7 likely deals with a specific obligation (perhaps regarding market price or reporting). The penalty is likely lower than Class A but still significant.

Class C. Ten rules are Class C. The penalty is under section 3A(1)(c). This is presumably the lowest of the three tiers. However, for a small participant, even the lowest tier can be material. The ten rules cover a range of STTM and capacity trading obligations. Notably, several are also conduct provisions (e.g., rule 260(5), 317B(3), (7)). The dual classification means breach can be tackled through both a court penalty and administrative directions.

Conduct provisions enforcement. For the 80 rules listed in Schedule 2, breach does not automatically lead to a civil penalty. Instead, the AER can issue a direction requiring compliance, seek an injunction, or take other enforcement action under Part 3 or 4 of the National Gas (Victoria) Law. The AER may also issue an infringement notice (a penalty notice) for certain conduct provisions, but the Regulations do not specify which. The practical effect: the AER has a menu of enforcement options. For minor breaches it may issue a direction; for serious or repeated breaches it may escalate to civil penalty proceedings if the rule is also a civil penalty provision. The Regulations give the AER discretion.

Indexation. Penalty amounts index annually. The Regulations adopt that mechanism. Entities must track the current indexed penalty to assess risk. The indexation is outside their control and will increase compliance risk over time.

Related parties. The National Gas (Victoria) Law likely provides for liability of officers and employees. The Regulations do not address that, but the classification of a rule as a civil penalty provision may expose individuals. The source does not mention, but it is a standard feature of such regimes.

The Regulations are a subordinate instrument under the National Gas (Victoria) Act 2008. They sit beneath the National Gas (Victoria) Law (Schedule 1 to the Act) and the National Gas Rules (made under the Law). The Regulations do not modify the Law or the Rules; they merely prescribe which Rules are civil penalty provisions and conduct provisions for the purpose of the Law.

Interaction with the National Gas (Victoria) Law. The Regulations give effect to section 16A of the Act, which contemplates that regulations may prescribe provisions of the NGR as civil penalty provisions and conduct provisions, and set civil penalties. The Law provides the enforcement machinery (court jurisdiction, penalty quantum, indexation). The Regulations plug into that machinery.

Interaction with the National Gas Rules. The NGR themselves impose obligations. The Regulations select a subset for enhanced enforcement. The NGR are amended from time to time (by the Australian Energy Market Commission). The Regulations do not automatically track amendments. If the NGR rule referred to in a table changes (e.g., renumbering, repeal or amendment), the Regulations might become ineffective or ambiguous. The Regulations do not provide a mechanism for updating the tables other than by further regulation. This creates a lag risk: a rule may be amended but the Regulations still refer to the old rule number, causing confusion.

Interaction with the National Electricity Law and Rules. The Victorian declared gas system overlaps with the electricity market in that gas pipelines and STTM are part of the broader energy market. The Regulations do not directly interact with electricity law, but enforcement actions may involve common facts. The AER enforces both regimes.

Interaction with the Competition and Consumer Act 2010 (Cth). The National Gas Law is a cooperative scheme between states and the Commonwealth. The Regulations are made under Victorian law, not Commonwealth law. However, the civil penalty regime may intersect with the Competition and Consumer Act (e.g., the Australian Consumer Law) in cases of misleading conduct or anti competitive behaviour. The Regulations do not affect that.

Subordinate Legislation Act 1994 (Vic). The Regulations are made under the Subordinate Legislation Act and will sunset 10 years after making (on 16 April 2034) unless remade. That sunset date is explicit in the endnotes. This imposes a timeline for the responsible department to review and remake the Regulations. If not remade, the classification lapses and civil penalty and conduct provision enforcement reverts to the pre 2024 position (which was the 2014 Regulations, but they were revoked).

Interpretation of Legislation Act 1984 (Vic). The endnotes note that headings, examples, diagrams and punctuation form part of the Regulations. This is standard but affects interpretation: the schedules have headings that form part of the instrument, so the column labels are legally relevant.

No interaction with private law. The Regulations do not create contract rights or tort law duties. They are purely regulatory.

The Regulations were made on 16 April 2024 as S.R. No. 25/2024 and commenced on the same day. They revoked the National Gas (Victoria) (Declared System Provisions) Regulations 2014 (S.R. No. 22/2014). The original 2024 Regulations had only one class of civil penalty provisions (what is now Class A) and one table. The conduct provisions list was likely shorter at that time.

The National Gas (Victoria) (Declared System Provisions) Amendment Regulations 2024 (S.R. No. 137/2024) were made on 17 December 2024 and commenced the same day. These amendments made significant changes:

• Inserted regulation 4A (Class B civil penalty provisions and civil penalties) and regulation 4B (Class C civil penalty provisions and civil penalties). This created the three tier system.
• Substituted Schedule 1 with a new version that includes three tables instead of one. Table 1 (Class A) retained only rule 326A(2). Table 2 (Class B) added rule 289E(7). Table 3 (Class C) added ten rules (260(5), 289E(1), (3), (4), 290A(3), 293(5), (6), (7), 317B(3), (7)).
• Amended Schedule 2 (conduct provisions) by adding 17 new items: rules 286B(5), 289A(1), (2), 289E(5), (7), 289F(1), (2), (4), 293(2), (3), (8), 303(2A), 308(2) (note: 308(2) may have been added earlier, but the table shows 308(2) as item 54; likely added later), 317A(4), 317B(3), (7). Also likely corrected item numbers.

The reason for the amendment: the source does not state. It likely responds to identified enforcement gaps or to align with changes in the NGR (perhaps the introduction of new STTM rules or capacity trading reforms). The amendment expanded both the civil penalty and conduct provision lists, showing an intent to increase enforcement coverage.

Future amendments could occur if the NGR changes or if the responsible department decides to add or remove provisions. The sunset date of 2034 means a comprehensive review is mandatory.

The instrument itself does not refer to any court proceedings. As a subordinate instrument issued in 2024 (with amendments in December 2024), it is very recent. There is no known litigation directly challenging the Regulations or interpreting their application. However, the underlying National Gas Rules and the National Gas (Victoria) Law have been subject to litigation. Cases concerning civil penalty provisions under the previous 2014 regulations may have been decided, but the source does not mention them.

The Regulations could be challenged on grounds that they exceed the power under section 16A of the Act, for example if the prescribed provisions are not "declared system provisions". That is unlikely to be litigated given the explicit language. More likely, litigation will arise when the AER seeks a civil penalty for breach of a listed rule. The defence may argue that the rule was not properly prescribed or that the penalty amount is not correctly indexed. The Regulations' incorporation of the Law's indexation clause may be challenged as an improper delegation. But the source provides no cases.

In the absence of litigation history, the Regulations should be considered untested. This creates legal uncertainty. The addition of the three tier system via amendment regulations could also be challenged for procedural reasons (e.g., failure to comply with consultation requirements under the Subordinate Legislation Act). The endnotes show the amendment was made on 17 December 2024, but no explanation of process is given. Entities facing a penalty may raise jurisdictional arguments.

The practical consequence: without case law, there is no guidance on issues such as the meaning of "declared system provision" in the context of a particular rule, or how the penalty should be calculated for a continuing breach. This adds to compliance and litigation risk. The AER may adopt conservative interpretations.

The indexation trap. The civil penalty amounts are indexed annually under clause 47A of Schedule 2 to the National Gas (Victoria) Law. The Regulations adopt that indexation. Many compliance manuals may refer to the penalty amount as at the date of the Regulations, not the current indexed amount. An entity conducting a risk assessment using outdated figures will underestimate its exposure. The indexation is automatic and not subject to the Regulations' amendment process. The AER will likely apply the latest indexed amount.

Sunset risk. The Regulations will sunset on 16 April 2034. If not remade, the classification of all provisions as civil penalty or conduct provisions will lapse. However, the revocation of the 2014 regulations means there is no fallback. The government may remake the regulations in a timely manner, but any gap leaves enforcement in limbo. Entities should monitor the sunset date and the consultation process for new regulations.

Overlap between civil penalties and conduct provisions. Some rules appear in both Schedule 1 and Schedule 2 (rule 260(5), 289E(5), (7), 293(2)-(8), 317B(3), (7)). This dual classification means the AER can both seek a civil penalty and issue a direction for the same breach? The National Gas (Victoria) Law may restrict double punishment. But the risk is that the AER may use a direction to compel immediate compliance while also seeking a penalty for past breach. Each action is separate. The Regulations do not clarify the interaction.

The number of conduct provisions. Schedule 2 contains 80 items, some of which are broad (e.g., rules 216, 219, 246, 268, 270, 291, 295, 296, 300, 301, 302, 304, 305, 307, 334, 335, 337, 338). These are entire rules. A rule may contain multiple obligations. The Regulations do not specify which subparagraph within a rule is a conduct provision; they list the rule number. This means a breach of any obligation in that rule can be considered a breach of a conduct provision. The compliance burden is therefore wider than the rule count suggests.

New STTM provisions added by amendment. The 17 December 2024 amendment added rules 289E, 289F, 293 and others specific to the STTM. Entities participating in the STTM may not have updated their compliance programs to account for the new civil penalty exposure. The amendment took effect immediately without a transitional period. Any breach occurring after 17 December 2024 is subject to the new classification. This is a trap for the unwary.

No penalty amount in regulations. The Regulations do not state the penalty amounts. An entity reading only these Regulations will not know the maximum penalty. It must cross refer to the National Gas (Victoria) Law and the current indexation factor. That requires accessing the Law as amended and checking the indexed value. The Law itself may not be readily accessible. This is a hidden compliance cost.

Due to the Regulations' nature as a classification instrument, compliance involves ensuring adherence to the underlying NGR rules that are listed. The steps are:

1. Identify the listed provisions. Compile a current list of all NGR rules that are civil penalty provisions (Schedule 1, Tables 1-3) and conduct provisions (Schedule 2). Note that some rules appear in both. Use the version of the Regulations as amended (SR No 137/2024). The list changes only by amendment to these Regulations, so monitor the Victorian legislation website for any further amendments.

2. Map obligations to operational procedures. For each listed rule, identify the specific requirement. For example, rule 289E(1) may require a participant to act in good faith in the STTM; rule 293(5) may require reporting imbalances. A compliance matrix should link each rule to the relevant operational process (capacity trading, STTM operations, access arrangement information, etc.). The matrix must be updated if the NGR is amended, because the rule content may change even if the rule number remains the same.

3. Assess penalty exposure. For civil penalty provisions, look up the current indexed penalty amount under the National Gas (Victoria) Law. The Law provides maximum penalties per breach. For corporations, the amount is likely higher than for individuals. The indexation factor can be found in the Law or obtained from the AER. For continuing breaches, determine whether the penalty applies per day. The Regulations do not specify, but the underlying Law likely does. This affects the financial risk assessment. Use the latest indexed figure, not the one from 2024.

4. Implement controls for conduct provisions. For rules that are only conduct provisions, the risk is not a civil penalty but a direction from the AER. Non-compliance can result in a direction requiring remedial action or cessation of a practice. That can be costly. Controls should be designed to prevent breach, not just to manage penalty risk.

5. Monitor STTM obligations closely. The December 2024 amendment added STTM obligations as both civil penalty and conduct provisions. If the entity is a STTM participant, ensure compliance with rules 289E, 289F, 293, 317B, 326A and 290A. This may require changes to trading systems, nomination processes, and reporting.

6. Review the interaction with the National Gas Law. Understand how the AER enforces civil penalty provisions. The AER can apply to the court for a penalty. The court must be satisfied on the balance of probabilities. The Regulations do not change the standard of proof. However, the AER may use the conduct provisions to issue a direction without going to court. That can be a faster remedy.

7. Track upcoming sunset. The Regulations expire in 2034. But the 2024 Regulations may be remade earlier or replaced. Engage in any consultation processes. If the Regulations are not remade, the enforcement basis for the listed provisions evaporates. However, the National Gas Law may still apply general provisions. It is prudent to plan for continuity.

8. Seek legal advice on dual classification. For rules in both schedules, understand the AER's enforcement policy. The AER may issue a direction and also seek penalties. The National Gas Law may prohibit double punishment, but the direction is not punishment. Understand the risk of multiple enforcement actions.

9. Audit current compliance. Given the recency of the amendment regulations, conduct an audit to confirm that operations meet the listed rules. Pay attention to rule 326A(2) (capacity trading) and STTM rules. The audit should include document review, interviews, and system checks. Retain records of compliance.

10. Update compliance documentation. Include these Regulations in the compliance register. Note the penalty exposure. Communicate to relevant staff the change in enforcement risk. For new obligations added in December 2024, train staff accordingly. Ensure that the compliance program is updated to capture the new rules.